European Stock Exchange in the Cards?

Several European financial centers have responded positively to German Chancellor Merz's proposal for a unified European stock exchange, aimed at boosting European market competitiveness and attracting more listings. The initiative seeks to address the trend of European companies choosing to list on US exchanges due to greater capital availability and liquidity.

Key Points

Chancellor Merz has advocated for the creation of a pan-European stock exchange to retain European companies and foster growth within the EU.
Euronext, a major European market operator, expressed willingness to contribute to market consolidation.
The German Finance Ministry supports the goal of a more efficient and broader European capital market.
The Deutsche Börse acknowledges the need for stronger European capital markets, highlighting its role and responsibility.
Market fragmentation within the EU is identified as a key obstacle hindering European IPOs (Initial Public Offerings).
National interests and competition between EU member states, particularly Germany and France, pose challenges to greater stock exchange cooperation.

Background

The European stock market landscape is highly fragmented, with numerous trading venues and a lack of transparency compared to the United States. This fragmentation leads to reduced liquidity and makes European exchanges less attractive for large companies seeking to go public. Many European firms, including successful companies like BioNTech, have opted for listings on US exchanges, primarily the New York Stock Exchange (NYSE), to access larger pools of capital and benefit from higher trading volumes. Chancellor Merz has been a vocal critic of this trend, arguing that the EU's fragmented capital market hinders its economic competitiveness. He believes a consolidated European exchange could reverse this trend and encourage more European companies to list and grow within the EU.

Numbers & Facts

Friedrich Merz: German Chancellor who proposed the Euro-Börse (European Stock Exchange).
Stéphane Boujnah: CEO of Euronext, which operates exchanges in Amsterdam, Brussels, Dublin, Lisbon, Milan, Oslo, and Paris.
Deutsche Börse: Operator of the Frankfurt Stock Exchange, emphasizing its pan-European role.
500+: Number of trading venues in the EU, contributing to market fragmentation.
30%: Approximate share of stock trading occurring on transparent exchanges within the EU.
1: Number of IPOs in the Prime Standard segment (for large, international companies) on the Frankfurt Stock Exchange in the current year.
June 2025: Month when Merz criticized the fragmented nature of the EU capital market.
USA: Primary destination for European companies seeking IPOs due to greater capital and liquidity.

Assessment

Chancellor Merz's proposal has the potential to significantly reshape the European financial landscape. For European companies, a unified stock exchange could provide easier access to capital and increase their visibility to international investors. For the EU, it could enhance its economic competitiveness and reduce its reliance on US capital markets. However, the success of this initiative hinges on overcoming several obstacles. National rivalries and differing regulatory frameworks could hinder the consolidation process. The Deutsche Börse's self-assessment as a leading pan-European player suggests it may seek a prominent role in any future consolidated exchange, potentially leading to friction with other exchanges and national interests. The support from the German Finance Ministry indicates a commitment at the government level, but achieving consensus across the EU will require careful negotiation and compromise.

Outlook

The immediate next steps likely involve further discussions and feasibility studies to explore the practicalities of creating a unified European stock exchange. This will involve addressing issues such as regulatory harmonization, clearing and settlement procedures, and the potential impact on existing exchanges. Overcoming national interests and securing buy-in from key stakeholders across the EU will be crucial for the success of the initiative. It is also expected that The Deutsche Börse and Euronext will each attempt to play a leading role in any future consolidation. The coming months will reveal whether Chancellor Merz's vision can gain traction and lead to concrete steps towards a more integrated and competitive European capital market.

Source: https://www.tagesschau.de/wirtschaft/finanzen/reaktionen-europaeische-boerse-merz-100.html